Many employers seek guidance on bonus and incentive pay norms for nanny employment. There is no “one size fits all” solution; there are as many creative ways to approach this as there are nanny employers.
A cash bonus is by far the most popular solution – both to families and nannies. HomeWork Solutions’ finds that the average year end bonus is one – two weeks of pay. Long-term staff bonuses may be as high as one month’s pay. For newer staff members, many families calculate one day’s pay for each month of employment, up to the maximum they would consider. All bonus payments are ALWAYS at the discretion of the employer, and the nanny’s length of employment, overall performance, and the means of the employer are all factors in this decision. Bonuses generally reflect the family’s appreciation for continuity of care for their child(ren) and recognition for a job well done. A bonus is not a substitute for an annual pay review.
A small personal gift from your child is also appreciated. This might be a framed photo of the nanny with the child, a piece of original ‘art’ from the child, or cookies that the child helped you bake. Families also sometimes give additional paid vacation in lieu of a bonus (above the agreed upon annual leave). Families who pay anniversary bonuses generally do not pay additional year end bonuses (bonus upon the employment anniversary date).
Occasionally, families will make a contribution to a nanny’s retirement account or a tax-free contribution to a 529 educational savings plan for the nanny’s dependant child. We recommend you discuss this with your nanny before making the commitment – some nannies find this as paternalistic on the part of the employer. Other nannies are thrilled.
Other incentives include health club membership, airfare home, and payment for all or part of health insurance premiums. Nannies also report receiving gift cards to popular restaurants or day spas, flowers, and other expressions of appreciation. Remember, most bonuses and non-cash compensation (with the exception of health insurance premiums) are taxable income to the employee and should be reported as such.
Lest it be overlooked, may we remind everyone that words of praise are always appreciated. Nannies – let your employers know what you appreciate about your job. Families, the nanny needs positive feedback too.